In a fascinating 22-page study of money and currency, Christopher Weber shows that every government - from Athens, to pre-collapse Rome, to the Islamic countries in the Middle Ages - which stuck to the Greek standard of coins has been stable and prosperous.
Specifically, the Athenian Drachma contained 65.6 grains of silver. Even after Greece declined as a superpower, its currency remained stable.
The Roman Denarius, Byzantine Bezant, and Islamic Dinar all copied the Drachma, using around 65.6 grains of gold or silver in their coins.
For the many centuries the Romans, Byzantines, and Islamic rulers left this precious metal content alone, they had stable and prosperous money supplies and nations.
But after the Romans and Byzantines started to whittle down the precious metal content of their coins - and after the Muslims started issuing paper money - their currency went down the drain, their prosperity plummeted and their empires collapsed.
This may all sound like ancient history, except that Weber points out that:
The US dollar has been depreciating for generations. Seventy years ago it was first devalued from $20.67 a gold ounce to $35. Then 35 years ago the devaluation started gaining strength. The dollar has lost over 90% of its gold value since August 15, 1971.
History is repeating . . . Sound money is again being trashed, which is causing the collapse of the American empire.
Okay. I understand the inflation argument.
ReplyDeleteHow could I not understand it? It's being sung from every rafter in the country by every Libertarian economic-tinker that thinks they have the solution to the world's problems. (And they all think that!)
This is almost godly-self-evident apparently because their brand of soothesaying Libertarianism isn't holding the seat of power by its shit-stained pants at the moment.
But!, let us not forget, both Alan and Ben have described themselves as Libertarians.
The term Libertarian is something akin -in parlance- to the term Bolshevik.
"Bolshevik" means in Russian, -the majority party.
In English, similarly, "Libertarian" means -the party for freedom.
And in doublespeak, "I have your interests in mind," means nothing of the sort.
So take a wild-swinging grasp at the brass ring of transcendent truth and ask yourself, When was the last time 50% of the economists were right about anything?
BINGO! Hand out the cigars, the ones without the firecrackers in them! A baby has been born. Don't let it die now!
So, other than the fact that we all know Bailout Ben is a jerk, that he's printed up a Big Dipper full of money, and that HIS focus is saving the banks, what if Big Ben is right, and deflation is the danger right now?
What if no matter what Benny does, he's not going to be able to lick the deflation problem -because licking deflation requires convincing the markets (right down to you and me) that things are all right again, and prices will gently rise like sweet cream from a new spring's first clover of a new economic stability?
You can stop laughing.
Everyone is screaming Ben is going to overshoot the mark with all this money.
But a lot of very-phony-money has evaporated -and a lot more -continues to evaporate every day.
Unfortunately, a helicopter will not bring stability. Nor can brigades of helicopters cannot deliver stability.
We now have a banking system and an automotive industry that have been completely re-tooled to please government so they can get their daily fix of bailouts.
Cash for clunkers and home purchasing tax credits do not make a sustainable economy. These are just gimmicks, perks for the good-old-boys back home.
Nor will these gimmicks prevent deflation over the long term. They add to it, if you analyze them.
Nope, kids. It ain't gonna be inflation for a very long time.
It's still deflation. It will remain deflation.
Ben is acting like he CANNOT print ENOUGH money.
And that is the truth. He CANNOT. Deflation is coming, just as sure as the tide will come in.
Now. In the last depression, -I've been told-, the small farms in the area where I lived were sold off for back taxes.
I always assumed, this was because the farmers couldn't afford the taxes. -I was wrong.
The farms were not worth the taxes levied against them.
These small farms -were the vehicles of economic production in 1929, an era still made of horse-drawn agriculture.
And the truth this time will be the same.
Vehicles of economic production are going to be taxed out of existence. They will become less valuable, and again -this is deflation at work.
And, I am going to say it anyway, despite the fact -it's not in any of the economics text books.
Increased taxation is deflationary. Increased taxation causes a devaluation of that which is taxed, AND, everything else too, because there is simply less money to go around.
So forget about inflation, -if you're trying to preserve your dwindling net worth.
DEFLATION is what is going to crack open and drain the innards out of everyone's nest egg that owns anything tangible.
You can curse me and quote me.
Look buddy, I don't how Bernanke prints his money and all that mumbo jumbo, but just go buy some groceries and tell me if you're paying less or more. And don't focus on housing because that is just one special sector under stress, but rather the everyday items you buy at Wal-mart, etc.
ReplyDeleteRomans? I will go one better. Let's look to the Bible for a reference.
ReplyDeleteGenesis 47:15 http://www.sacred-texts.com/bib/kjv/gen047.htm
15 And when money failed in the land of Egypt, and in the land of Canaan, all the Egyptians came unto Joseph, and said, Give us bread: for why should we die in thy presence? for the money faileth.
16 And Joseph said, Give your cattle; and I will give you for your cattle, if money fail.
17 And they brought their cattle unto Joseph: and Joseph gave them bread in exchange for horses, and for the flocks, and for the cattle of the herds, and for the asses: and he fed them with bread for all their cattle for that year.
18 When that year was ended, they came unto him the second year, and said unto him, We will not hide it from my lord, how that our money is spent; my lord also hath our herds of cattle; there is not ought left in the sight of my lord, but our bodies, and our lands:
19 Wherefore shall we die before thine eyes, both we and our land? buy us and our land for bread, and we and our land will be servants unto Pharaoh: and give us seed, that we may live, and not die, that the land be not desolate.
20 And Joseph bought all the land of Egypt for Pharaoh; for the Egyptians sold every man his field, because the famine prevailed over them: so the land became Pharaoh's.
It's the same play over and over and over and over again. Collapse the economy, buy it all up on the cheap so the common folk can eat! Not only can the common folk eat, they will thank the parasites for allowing them to live!
To quote Charley Reese:
"How can people who are ignorant of history, economics and basic science make an intelligent choice for a national leader? They can't".
"But!, let us not forget, both Alan and Ben have described themselves as Libertarians."
ReplyDeleteLet us also not forget that you can call yourself a giraffe, but that does not make it so.
To all my libertarian friends, please read the smartest libertarian contrarian out there and his case for deflation (not inflation). I am talking about Robert Prechter and his great site www.elliottwave.com. Check out this link http://www.elliottwave.com/deflation-survival-guide.aspx. The main reason why deflation is happening and coming even with the massive debasement of the currency is because inflation is due to an increase of money supply AND CREDIT. Deflation is due to decrease in money supply and CREDIT. What we have right now is increase in money supply (drop in a bucket) against massive decrease in credit. Only Prechter has predicted was is happening, not Jim Rogers, Doug Casey, Peter Schiff or Steve Saville. Remember, Zimbabwe and Weimar Germany hyperinflation happened in an environment with NO credit. So, in order to have hyperinflation in the US, we will need total destruction of credit first, which will create massive deflation. So, just remember one thing: deflation first, hyperinflation maybe thereafter.
ReplyDeleteasset prices must collapse to 1980 levels if they are to be serviced by present real income. this is actually good news for most people. new buyers get to come as buyers at levels that make sense (90% off 2006 values). banks get to foreclose upon and re-sell assets. its pretty much a win-win for everyone.
ReplyDeleteThis just goes to prove that tru-out history, although they did not intend to at the outset, most government eventually become crooks in order to hold power over the masses.
ReplyDeleteHistory does repeat itself.
Hank, Montreal.
Asset prices on balance sheets will continue to deflate, but expenses on income statements will continue to rise... this is asset deflation with price inflation. Taxes are not a bad thing unless they are replaced by debt. The problem is deferring taxes and replacing tax income with debt... ask California. The problem is deficit spending at the behest of the anti tax crowd.
ReplyDeleteHigher taxes, lower spending, and monetary inflation is the only cure... the resulting depression will be hard, but hopefully shorter than the "japanese" solution
Yea, they will liberate us from all our assets if they have there way.
ReplyDeleteDon Robertson, All that money that is being "printed" is not evaporating. At some point it will make itself known.
ReplyDeleteBen Bernanke is about as much a Libertarian as Bernie Madoff is an altruist. He's is nothing more than a whore for the banking cartel, and a lying one at that. Just another bit of scum on the fetid D.C./Wall Street
ReplyDeletepond.
Don, I don't think you understand how a hyper-inflationary outcome occurs. I'll give you two words that I hope will help you towards understanding. Capital Flight. The minute that we can no longer rely on foreign funding, the authorities will be forced to print, to truly monetize all the debt issuance. Capital Flight can start slowly but, literally overnight, it can become a torrent.
I expect that to happen by hook or by crook. Our capital markets are so distorted and corrupt that it is inevitable that capital will look elsewhere for a return. It's simply a matter of those who loan us capital and have a lot of dollars finding the best possible out for themselves.
Take your pick:
ReplyDelete- devalue debt in dollars, preserving value of currency; or
- preserve value of debt in dollars, devaluing the currency.
As most seem unwilling to accept the devaluation in dollars of debt they hold, devaluation of the currency must then implicitly occur, as otherwise holders of currency will not exchange it for held debt.
Inflation or deflation? It's easy, folks. We'll have both. Deflation of everything we HAVE (houses, stocks, etc.) and inflation of everything we NEED (food, energy, gas, etc.). Our standards of living are going down the drain...
ReplyDeleteAbolish the fed and their paper obligations will go with them into bankruptcy. Each bill of credit is a "federal reserve note" owned and owed by the private owners of the "fed". Their liquid assets won't pay for their obligations under "fraud and criminal forfiture laws".!!! Doc S.
ReplyDeleteThe debt service pressure on American families has become unbearable. Wall Street has whored out everything possible to make a buck on, including Uncle Buck himself. Imagine how much more productive we would become as a society if all the intellectual capacity devoted to quant funds was doing something useful, rather than micro managing parasitic hyper capitalism.
ReplyDeleteA common mistake is to confuse inflation with the lack of faith in a currency. Sound fiscal policy trumps hubris every time. Just ask the Swiss.
I'd love to comment but everybody seems to go by the pseudonym"anonymous". How about a few names, eh?
ReplyDeletea "pure" copper penny used to be worth 1/100th of a dollar. what is the present day "cost" of one hundred "pure" copper pennies nowadays?
ReplyDeletesilver nowadays has far more industrial uses than gold does. gold is still hoarded by Central Banks and Governemnts (amoungst others) while silver is not.
I've read that silver is actually "more rare" than gold at present. [Comex stores, various government mints etc] Is this true? Would silver then be quantitatively "more valuable" than gold, in the metal backed currency sense?
hitherto, silver had historically been the basis for the "Peoples' Coinage", i.e., small transactions. Would that remain the case if a metals backed currency were to be introduced again?
whatever.
Fellow Traveller
THIS IS ALL GR-8 STUFF! ALL OF THE COMMENTS ARE VERY THOUGHT PROVOKING. BUT, DO I STILL NEED TO BUY AU & AG? INQUIRING MINDS WANNA KNOW???
ReplyDeleteThose who choose to misconstrue a few words written in earnest, might better assess what I said, should I paraphrase myself.
ReplyDeleteBen Bernanke has printed a mountain of money. He has thrown it all into the ocean. The tide is still coming in.
Until wages rise, there will be no hyperinflation.
(My name url-link -this time- is to a current picture, and an introduction as proper as it gets on the Internet.)
I am grateful to have all both the article and each comment to consider and would like to offer a point for consideration. A fine economist once noted that nowhere does price inflation and price defalation occur in a vacuum but reside togather in any economy so those who see price defalation won't be disappointed nor will those looking for price inflation. We are seeing both in our economy so examples of each are easily had. As this process goes forward the overall monitary inflation may be found in the price inflation of items of need and price deflation in items of convienience. I propose we now see the dynamic in motion and unfolding.
ReplyDeleteThere is nobody on this form that lived through a hyperinflation or deflation. After WW II there was no economy in Germany, the N point was barter. Shoes for somebody who wants to trade for a blanket. Gold had no real value unless you could get to Switzerland where $40 US dollars got you one ounce of Gold or the clappe. An OD gallon tin of Margarine was worth more than Gold or even dollars. Worthless money is worthless. When you went to see your fraulein you brought food, pots, pans you name it but not money. Money was for money changers and if you were not in the business, forget it.
ReplyDeleteGod help us if we get to the point of having to barter directly goods or services for goods or services. Frankly I doubt it will get to that level. Then again we are ruled by a superclass of eugenicists who want to eliminate most of the population. So get a bit of storable food and bartarable items just in case.
ReplyDeleteIn other words, sociopaths in high positions find it highly profitable to lie, steal and murder. The other 99% non-sociopathic population find it difficult to believe and even more difficult to stop. Why? Because those in high positions figured out that through education (print, sound and video) they could tell folks WHAT to think. Exactly like a virus implanted that disables your natural self-defense of mind, body and soul. Thus the cycle continues. Promise money (fiat) fails to keep its promise, and barter returns with gold and silver. Those without gold or silver barter with whatever assets they may have, including their labor.
ReplyDeleteCurrency debasement is the result of interest charges. Consider the following:
ReplyDeleteIf someone brought a 1/10 oz gold coin to the bank in the year 1 AD, and the money remained there until the year 2000 AD, collecting a yearly interest of 4%, the amount of gold in the account would have been 3.6 * 10^31 kilograms of gold. This is 1.9 * 10^27 cubic metres of gold weighing 317 times the complete mass of the Earth.
Even a dumb-ass can see that interest on money is unsustainable and leads to crisis. If you know that, you can end the depression in a few months, have constant economic growth at maximum potential without crisis, without unemployment or government intervention forever. You can read more about it here:
http://www.naturalmoney.org/introduction.html
Travis is right. As the Founders knew, only an educated and moral citizenry can sustain this constitutional republic. That's why they were NOT enamored of the idea of universal suffrage.
ReplyDeleteLook at the last election: Most of the less educated and least prosperous voters went for Obama. The ones on welfare, the public sector workers, and minorities---all generally those who expected to GET more from the gov't---voted for him overwhelming. The GOP candidate with the best understanding of constitutional and economic issues, Ron Paul, had NO chance of being nominated.
We are having and will have simultaneous price deflation AND inflation. The asset classes that were "bubbleized"---e.g., housing and commercial property---are seeing and will see price deflation until the market has settled so supply and demand can meet. Of course, our brilliant leaders are doing their best to prevent the market from doing what it NEEDS to do.
Other classes of goods and services---food, fuel, most clothing, new cars to a certain extent, insurance, health care, etc.---are seeing price inflation.
Peter Schiff explains this divergence very well in his books and articles.
robert precter is clearly articuate BUT, when evaluatng his call for DEFLATION, just remember that precter was bearish literally through the last 9-10 years of the bull market that ended in 2007/2008. His ideas are theory bound and based more on what should happen under elliot wave theory than on what is actually transpiring in markets and the real world.
ReplyDeleteWardoc
"There is nobody on this form that lived through a hyperinflation or deflation. After WW II there was no economy in Germany, the N point was barter. Shoes for somebody who wants to trade for a blanket. Gold had no real value unless you could get to Switzerland where $40 US dollars got you one ounce of Gold or the clappe..."
ReplyDeleteToday in Zimbabwe poor children are panning streams for grains of gold, a third of a gram buys you a loaf of bread. Gold of no value in hyperinflation?
These fraudster/bankers/politicians will use any means to steal your wealth. Taxes, inflation, deflation, incarceration, mutilation, and fascist manipulation by corporate administration.
ReplyDelete